Competition in the soon-to-boom credit bureau industry is stepping up, with Experian launching what it says is the country’s first predictive fraud bureau.

The bureau allow banks and other companies that provide credit such as telcos and utilities firms to pool data so they can better detect fraudulent identities before they are granted credit.

Experian’s Australian managing director, Kim Jenkins, said a three-month trial of the new bureau with eight companies achieved detection of fraudsters that was 14 per cent higher than what the companies’ own anti-fraud systems had detected.

“We know that there’s a significant uplift when lenders pool their data," she said. “The trial’s results were very encouraging."

Credit bureaus facilitate the sharing of data between lenders so they know more about the risks of new and prospective customers.

Traditionally they have gathered credit histories on individuals and created blacklists of people who have failed to pay back loans.

But as more data has become available though services such as internet banking they are increasingly being used to combat fraud.

Experian, backed by a UK-listed group, entered into the Australian credit bureau market in 2011 through a joint venture with local lenders. ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank, Westpac Banking Corp, Citibank and GE Capital each own 4 per cent of the Australasian business.

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Competitor and industry incumbent Veda will next week list on the ASX in a $1 billion float. It has operated a fraud bureau since 1998 and recently launched a new software product aimed at combating fraud linked to identify theft.

Third player Dun & Bradstreet tracks the behaviour of individuals to determine if they are likely to in fact be a fraudulent identity.

That service has been available to telecommunications firms and is now being rolled out to banks.

New rules will help pooling of data

The credit bureau industry is looking to shift up a gear once positive credit reporting takes effect next March. The new rules will allow them to pool much more data which is now off limits because of privacy laws.

Steve Brown, head of Dun & Bradstreet’s credit bureau, said ­comprehensive credit reporting will lead to new services. “We’ll have a much stronger ability to predict potential fraudsters once comprehensive credit is running," he said.

Ms Jenkins said while rival firms had anti-fraud software, Experian was the first to take the concept of a credit bureau and apply it to combating fraud through the pooling of data such as names, birth dates and addresses and using algorithms to predict which applications were fraudulent. Experian’s fraud bureau differs from Veda’s she said, because it is predictive rather than a black list of known fraud incidents. When multiple applications for credit are made and the supporting data does not match, lenders are alerted.

“Many organisations keep a blacklist to help in making credit decisions. But blacklists are static and historical while frauds happen in the moment. You find that a fraudster doesn’t make one application and sit back," she said. “Quite often they make multiple bogus applications across the industry.’’

Fraudsters often work in syndicates which take lists of names, addresses and birthdates and then make hundreds or thousands of applications for credit, Ms Jenkins said.

Experian’s new service means credit providers will be alerted when personal details such as phone numbers and employer’s names do not match.

With people doing more transaction on iPhones and tablet computers, the next step is using data on the devices themselves to combat fraud, she said.